London Exchange to Revive Markets With Bitcoin And Ethereum ETN

The London Stock Exchange on Monday announced its intention to accept applications for Bitcoin and Ethereum Exchange Traded Notes, ETN. This move signifies the commission’s effort to set a new stage for a new market segment in the UK.

The announcement is the sequel to the UK’s Financial Authority Conduct updates stating that it “will not object to requests from Recognised Investment Exchanges (RIEs) to create a UK-listed market segment for cryptoasset-backed Exchange Traded Notes (cETNs).”

Conditions For the cETN:

• The ETN would be available for professional investors, such as investment firms and credit institutions authorized or regulated to operate in financial markets only.

• Exchanges will ensure sufficient controls are in place, so trading is orderly and proper protection is afforded to professional investors.

•  The  Crypto ETNs. cETNs,  must meet all the requirements of the UK Listing Regime, for example on prospectuses and ongoing disclosure.

The LSE said it would accept applications for the ETNs in the second quarter but didn’t give a specific date.

The commission came up with this idea two months after the US Security And Exchange Commission, SEC, approved Bitcoin Exchange Traded Funds which has become a booming spot for investors.

ETN Overview:

The ETNs are debt securities, unlike ETFs which regularly distribute dividends. While spot ETFs represent investors’ stake in an underlying asset, ETNs are issued as debt notes that are traded more like bonds than stocks.

ETN investors are not subject to short-term capital gain taxes, they are only required to pay taxes on their investments when sold for gains. The short-term capital gain is the same rate as an individual’s ordinary income tax rate. 

ETNs don’t hold any portfolio securities, so there are no dividend or interest rate payments paid to investors, all taxes are deferred and taxed as capital gains. Investors are subject to a long-term capital gain tax only when they sell the ETN.

ETN investors can significantly boost returns by not paying annual taxes on dividends.

However, this tax treatment may not apply to currency ETNs.

The UK cryptocurrency space has experienced pushback due to the regulator’s low interest in approving crypto businesses. But now the game has changed with the FCA indicating interest and readiness to approve crypto investments.